Fixed annuity yields at banks plunge in October

October was a cruel month for banks selling fixed annuities. The most recent compilation from Kehrer Saltzman & Associates’s Fixed Annuity YieldTrend Report disclosed that the average yield of a fixed-rate annuity sold through banks tumbled 11 basis points to 1.88 percent in October.

That drop off represents a significant reversal from the rise registered in the previous four consecutive months, culminating in the 1.99 percent average annual yield recorded in September.

The Fixed Annuity YieldTrend Report is produced in conjunction with Beacon Research, which studies the fixed-annuity industry. It’s based on data from more than 60 individual fixed annuity products sold at banks by 20 different carriers.

According to Steve Saltzman, principal at Kehrer Saltzman, the firm spotlights yields rather than rates. In that way, the report highlights not just first-year rates, but measures current and guaranteed yields through the end of the surrender charge period. Thusly, it provides a better picture of the probable annual yield for the purchaser, Saltzman detailed in a statement accompanying the report. A consulting firm, Kehrer Saltzman & Associates works with banks, credit unions, broker-dealers, insurance companies and other financial services entities.

Not all bad news

There were some positive notes in the report, however. For one, the spread in yield between a five-year CD and the average bank-sold fixed-rate annuity is 1.1 percent, double the rate charted in January. Therefore, consumers shopping for yield are more likely to move money from CDs to fixed annuities.

Though yields failed to push through the 2 percent mark, recent increases in interest rates and yields “have been a welcome relief to many potential buyers and the sellers of these products,” concludes the Kehrer Saltzman survey.